Assume that an individual wins a lottery. Assume also that the individual was working before the lottery win and had no other nonlabor income before the lottery win.

a) Using the basic static model of individual labour supply, discuss both graphically and explain in your own words how the lottery win will affect the individual’s level of hours worked. Discuss all relevant effects.

b) Is it possible that the individual decides to stop working following the lottery win? In your answer discuss the concept of reservation wages and add the individual’s reservation wage before and after the lottery win to your graph.

Assume that an individual wins a lottery. Assume also that the individual was working before the lottery win and had no other nonlabor income before the lottery win.

a) Using the basic static model of individual labour supply, discuss both graphically and explain in your own words how the lottery win will affect the individual’s level of hours worked. Discuss all relevant effects.

b) Is it possible that the individual decides to stop working following the lottery win? In your answer discuss the concept of reservation wages and add the individual’s reservation wage before and after the lottery win to your graph.

Telstar Communications is going to purchase an asset for $420,000 that will produce $200,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12–12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket. Fill in the schedule below for the next four years.

Earnings before depreciation and taxes year 1 year 2 year 3 year 4

depreciation

earnings before taxes

taxes

earnings after taxes

depreciation

cash flow

Telstar Communications is going to purchase an asset for $760,000 that will produce $370,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12–12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket.

Fill in the schedule below for the next four years.

You are trying to establish the IgG response from a recently vaccinated individual, where it will be important to know how much IgG they have both before and after the vaccination. You start with two samples of 8 mL of blood, one from before vaccination and one after. You use an affinity chromatography technique to remove just the IgG (ε = 1.35 g^-1L cm^-1). You end with a 2 mL sample of each. The pre-vaccinated sample has an A₂₈₀ reading of 0.85, and the post-vaccinated sample with a 10-fold dilution has an A₂₈₀ reading of 0.202 (both with a 1 cm path length).

A) How many micrograms of IgG were in each of the original blood samples?

B) What fold change in IgG amounts was seen after vaccination? (this question is asking how much ending IgG was there as compared to how much starting IgG)

You are interested in assessing the overall effect of the using Corexit as a cleanup method on the intertidal sessile flora and fauna community separately using data collected from an experiment conducted after the Exxon Valdez oil spill (Table 2). Provide an appropriate graph to describe the data, include a figure caption and include a summary paragraph describing the figure provided. (Follow the CSE guideline format)

Table 2 Change in the % cover of dominant algae and sessile invertebrates on heavily oiled cobble beaches in Prince William Sound before and after tests of the effect of Corexit on the benthic intertidal community. Data modified from Peterson (2001).

A corporation owns a chain of several hundred gas stations in the Atlantic provinces. The marketing director wants to test a proposed marketing campaign by running ads on some local radio stations and determining whether gas sales at a randomly selected sample of the company’s stations increase after the advertising. The following data represent gas sales in hundreds of dollars for a day before and two weeks after the advertising campaign.

Station 1 2 3 4 5 6 7

Before 485 418 434 422 423 421 446

After 504 424 465 413 418 442 420

(a) Does advertising on local radio stations increase gas sales by more than 5 hundreds of dollars for this corporation in the Atlantic provinces? Conduct appropriate analysis and make your conclusion. Use α = 0.05. (b) What assumptions, if any, need to be met satisfactorily for the inference in (a) to be valid? Are these assumptions reasonably satisfied?

2. Green Manufacturing, Inc., plans to announce that it will issue $2,000,000 of perpetual bonds and use these funds to repurchase equity. The bonds will have a 6-percent coupon rate. Green manufacturing currently is an all-equity firm. The current value of Green’s equity is $10,000,000 and there are 500,000 shares outstanding. After the sale of bonds and share repurchase, Green will maintain the new capital structure indefinitely. Under its current capital structure the expected annual pretax earnings for Green are $1,500,000, and these earnings are expected to remain constant into the foreseeable future. Green is in the 40-percent tax bracket.

1. What Green’s weighted average cost of capital before the debt issue?
2. Construct Green’s market-value balance sheet as it looks before the announcement of the debt issue.
3. Construct the market-value balance sheet after the announcement?
4. How many shares of stock will Green retire?
5. Construct the market-value balance sheet after the debt issue and share repurchase are completed.

The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).

January 1, 2017 December 31, 2017

Accounts payable (18,000) (32,500)

Accounts receivable 51,000   101,000

Accumulated depreciation—buildings (42,000) (47,000)

Accumulated depreciation—equipment 0   (7,200)

Bonds payable—due 2020 (61,000) (61,000)

Buildings 131,000   103,500

Cash 57,000   10,200

Common stock (66,000) (76,000)

Depreciation expense 0   37,000

Dividends (10/1/17) 0   54,000

Equipment 0   61,000

Gain on sale of building 0   (8,200)

Rent expense 0   20,700

Retained earnings (52,000) (52,000)

Salary expense 0   42,000

Sales 0   (151,000)

Utilities expense 0   5,500

Additional Information

Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.

Agee purchased buildings in 2011 and sold one building with a book value of Kr 22,500 on July 1 of the current year.

Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

    2010 $2.75

2011 2.55

January 1, 2017 2.85

April 1, 2017 2.95

July 1, 2017 3.15

October 1, 2017 3.25

December 31, 2017 3.35

Average for 2017 3.05

Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $145,200, which included a remeasurement loss of $28,300.

Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $162,250, and a cumulative translation adjustment of $9,650 (credit balance).

(Input all answers as positive.)

1-Reasurement: Gain: ________________

2-Translation adjustment: Positive:______________

Problem 10-34 (LO 10-3, 10-4)

The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr).

January 1, 2017 December 31, 2017

Accounts payable (24,000 ) (31,500 )

Accounts receivable 45,000 95,000

Accumulated depreciation—buildings (36,000 ) (41,000 )

Accumulated depreciation—equipment 0 (6,600 )

Bonds payable—due 2020 (55,000 ) (55,000 )

Buildings 125,000 100,500

Cash 51,000 9,600

Common stock (60,000 ) (71,000 )

Depreciation expense 0 31,000

Dividends (10/1/17) 0 48,000

Equipment 0 46,000

Gain on sale of building 0 (7,600 )

Rent expense 0 18,100

Retained earnings (46,000 ) (46,000 )

Salary expense 0 36,000

Sales 0 (133,000 )

Utilities expense 0 7,500

Additional Information

*Agee issued additional shares of common stock during the year on April 1, 2017. Common stock at January 1, 2017, was sold at the start of operations in 2010.

*Agee purchased buildings in 2011 and sold one building with a book value of Kr 5,100 on July 1 of the current year.

*Equipment was acquired on April 1, 2017.

Relevant exchange rates for 1 Kr were as follows:

2010 $ 2.45

2011 2.25

January 1, 2017 2.55

April 1, 2017 2.65

July 1, 2017 2.85

October 1, 2017 2.95

December 31, 2017 3.05  

Average for 2017 2.75

a) Assuming the U.S. dollar is the functional currency, what is the remeasurement gain or loss for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $96,600, which included a remeasurement loss of $13,000.

b) Assuming the foreign currency is the functional currency, what is the translation adjustment for 2017? The December 31, 2016, U.S. dollar-translated balance sheet reported retained earnings of $112,500, and a cumulative translation adjustment of $10,800 (credit balance).